Impac Mortgage Holdings, Inc. Announces a 173% Increase in
Originations to $2.4 Billion in 2012 from $885 Million in 2011

February 27, 2013 06:10 PM Eastern Standard Time

IRVINE, Calif.--(BUSINESS WIRE)--Impac Mortgage Holdings, Inc. (NYSE MKT: IMH) announces origination
volume of $2.4 billion in 2012 as compared to $885 million in 2011, and
a 93% increase in net earnings of continuing operations to $12.2 million
in 2012, as compared with $6.3 million in 2011.

Selected Financial Data

(in millions)

YTD 2012

YTD 2011

Increase

% Change

Originations

$

2,419.7

$

883.2

$

1,536.4

173

%

Service Retained Sales

2,212.1

419.9

1,792.2

427

%

Servicing Portfolio

2,177.2

605.4

1,571.8

260

%

Warehouse Capacity

217.5

87.5

130.0

149

%

Segment Results

YTD 2012

YTD 2011

(in thousands)

Net earnings

Net earnings

(loss)

Diluted EPS

(loss)

Diluted EPS

Mortgage Lending

$

16,599

$

2.10

$

(11,648

)

$

(1.39

)

Real Estate Services

12,640

1.60

19,946

2.39

Long-term Portfolio

(17,065

)

(2.16

)

(1,996

)

(0.24

)

Continuing Operations

$

12,174

$

1.54

$

6,302

$

0.76

Discontinued Operations

(15,549

)

(1.96

)

(3,078

)

(0.37

)

Net (loss) earnings attributable to IMH

$

(3,375

)

$

(0.42

)

$

3,224

$

0.39

Segment Results

Q4 2012

Q4 2011

(in thousands)

Net earnings

Net earnings

(loss)

Diluted EPS

(loss)

Diluted EPS

Mortgage Lending

$

4,265

$

0.53

$

(2,930

)

$

(0.35

)

Real Estate Services

3,187

0.39

4,689

0.56

Long-term Portfolio

(5,822

)

(0.72

)

235

0.03

Continuing Operations

$

1,630

$

0.20

$

1,994

$

0.24

Discontinued Operations

(2,147

)

(0.26

)

(1,246

)

(0.15

)

Net (loss) earnings attributable to IMH

$

(517

)

$

(0.06

)

$

748

$

0.09

The continuing operations, comprised of mortgage lending, real estate
services and our long-term portfolio, earned $1.54 per diluted share in
2012 as compared to $0.76 per diluted share in 2011. The increase was
primarily associated with the increase in net earnings from mortgage
lending activities due to the growth in both mortgage lending
originations and the retention of mortgage servicing rights. In the
fourth quarter of 2012, continuing operations experienced a slight
decline in net earnings to $0.20 per diluted share as compared to $0.24
per diluted share for the fourth quarter of 2011. The decline was
primarily due to a reduction in the estimated fair value of the
long-term mortgage portfolio in 2012 compared to the prior year.

Mortgage Lending

In 2012, net earnings from mortgage lending improved 242% to $16.6
million as compared to a net loss of $(11.7) million in 2011. In the
fourth quarter of 2012, net earnings from mortgage lending increased to
$4.3 million as compared to a loss of $(2.9) million in the fourth
quarter of 2011. Both increases were due to higher levels of mortgage
originations, as well as an increase in the retention of mortgage
servicing rights from service-retained sales, which increased the
mortgage servicing portfolio. Mortgage originations increased to $813
million in the fourth quarter of 2012 compared to $345 million in the
fourth quarter of 2011 and the mortgage servicing portfolio increased
with service-retained loan sales of $781 million in the fourth quarter
of 2012 as compared to $289 million in the fourth quarter of 2011.

Although mortgage originations and service-retained loan sales increased
by 15% and 24%, respectively, in the fourth quarter of 2012 as compared
to the third quarter, net earnings of mortgage lending were lower in the
fourth quarter of 2012 as compared to the third quarter. This was due to
a larger than anticipated decline in the mortgage origination pipeline
in the quarter primarily caused by an anticipated seasonal decline
combined with the impact from the Federal Reserve’s QE3 program
initiated in September. The initial effect on interest rates from the
QE3 program was a rise in interest rates at the end of September. This
resulted in an increase in applications, during September, from
prospective borrowers wishing to lock in an interest rate before further
interest rate increases, increasing our mortgage origination pipeline at
September 30, 2012, to its highest point during the year. The Company
records an interest rate lock derivative each period representing the
estimated fair value of our mortgage origination pipeline. With a
significant decrease in the pipeline in the fourth quarter combined with
fourth quarter margin compressions in the mortgage industry, the
estimated fair value of the interest rate lock derivative declined $5.4
million.

In 2012, the mortgage lending channels that experienced the largest
percentage of growth were our retail and correspondent channels. Our
retail channel, which is our consumer direct channel conducted by our
branch offices, increased average monthly production to approximately
$60 million and our correspondent channel, which acquires closed loans
from our correspondent sellers, increased monthly production
significantly from approximately $3 million in January to average
monthly production of approximately $33 million in 2012. For 2012, our
retail channel production contributed 28% of originations while our
correspondent channel contributed 17%, with the remaining 55% coming
from the wholesale channel.

With our strategy to increase the mix of purchase money transactions, in
2012, we have continued to devote efforts towards capturing additional
purchase money transactions as the real estate market continues to
improve and interest rates continue to rise, which we believe will cause
the home refinance market to shrink. Through our proprietary technology,
we have been able to increase the number of relationships we have with
real estate professionals, leading to more purchase money transactions.
In 2012, while the mix of purchase money transactions and refinance
loans has remained consistent across the year, the number of purchase
money transactions has doubled from first quarter 2012 to fourth quarter
2012. In addition, we have enhanced our product offering to include more
loan products less sensitive to changing interest rates, including FHA
203(k), a home improvement loan that provides the borrower funds to make
renovations, reverse mortgages, Home Affordable Refinance Program (HARP)
loans and intermediate Adjustable Rate Mortgages.

Our mortgage servicing portfolio increased to $2.2 billion at the end of
2012, from $605 million at the end of 2011. At December 31, 2012, the
loans that were originated after 2010 totaled $2.06 billion with a
minimal number of loans 60 or more days delinquent. The remaining $114
million balance of the portfolio consist of loans originated by
AmeriHome, primarily prior to 2009 and was acquired in the 2010 purchase
of AmeriHome. These legacy AmeriHome loans continue to have high
delinquencies due to declining principal balances.

The expansion of mortgage lending volumes has been made possible by
increases in our warehouse borrowing capacity to $217.5 million at
December 31, 2012, including the addition of a major national financial
institution, from $87.5 million at the end of 2011. Plus, we recently
obtained approvals from another well-known national warehouse lending
bank for a new warehouse facility and increases to our existing
warehouse lenders for an additional $100 million in total warehouse
capacity, which we believe will further provide us the ability to
increase mortgage originations.

Real Estate Services

Net earnings from our real estate services segment decreased to $12.6
million from $19.9 million in 2011. The decrease was primarily due to a
continued and expected decline in the long term mortgage portfolio
resulting from collections and liquidation of defaulted loans. We
believe, however, that if portions of our master servicing portfolio are
transferred to new servicers, there may be an opportunity to offer and
expand our real estate services, although currently we expect a gradual
decline in revenues and net earnings of real estate services.

Long-term Mortgage Portfolio

Our long-term mortgage portfolio had a net loss of $(17.1) million in
2012 compared to a net loss of $(2.0) million in 2011 primarily due to
the change in the estimated fair value of the portfolio. The estimated
fair value of the net trust assets declined in 2012 as a result of $10.2
million in residual cash flows received combined with updated
assumptions applied to certain securitization trusts within the
long-term mortgage portfolio at December 31, 2012 which assumptions are
based on the expectation of an acceleration of foreclosure liquidation
losses in the near future.

Consolidated Operations

In 2012, the Company reported a consolidated net loss of $(3.4) million
or $(0.42) per diluted share, as compared to net earnings of $3.2
million in 2011 or $0.39 diluted per share, with the decrease primarily
due to the change in the estimated fair value of the long-term mortgage
portfolio in 2012. Net earnings were also adversely effected by the
previously announced settlement charge of $6.1 million recorded in the
third quarter of 2012 as discussed in the September 30, 2012 Form 10-Q
and a significant legal fees expense incurred during 2012 defending
these matters. For the fourth quarter of 2012, the consolidated net loss
was $(517) thousand or $(0.06) per diluted share as compared to
consolidated net earnings of $748 thousand or $0.09 per diluted share
for the fourth quarter of 2011.

We believe that the continued driver of growth in net earnings from
continuing operations for 2013 will be mortgage lending. The key to that
growth is not only mortgage origination volume, but also loan quality
and operational efficiencies. More specifically, we expect to see the
most significant increases in the volume of loans originated through our
retail and correspondent channels. We believe that this will primarily
be achieved by substantially increasing our active customer base in
correspondent lending and hiring additional retail loan officers for our
existing offices and call centers and our new retail offices currently
planned to be opened during 2013. Our wholesale lending channel will
continue to be a key component of our origination platform, however, in
2013, we will focus on retail and correspondent channels in an effort to
have originations more equally balanced across all of our channels. We
believe that each our channels, retail, correspondent and wholesale,
will benefit from (i) our recently launched programs including prime
jumbo program, FHA 203(k), and reverse mortgages, (ii) the increase in
our operational capacities with the opening of new operations
fulfillment centers, and (iii) the implementation of a new loan
origination system, and the integration of new technology designed to
capture and index loan documentation and data to more completely
automate the origination process. We expect the new loan origination
system and documentation and data technology will also help us to ensure
loan quality and improve operational efficiency.

Lastly we will continue to further enhance the brand of the “Impac” name
with increased consumer direct and business to business awareness
through our social media, public relations campaigns and industry wide
marketing. We believe our efforts in creating better “Impac” brand
awareness over the last year not only assisted our origination efforts
but have enhanced our recruiting efforts for quality mortgage
professionals.

Looking forward to 2013, Mr. Joseph Tomkinson, Chairman and CEO of Impac
Mortgage Holdings, Inc., commented, “We expect that the culmination of
our strategies and initiatives instituted over the last year will not
only allow us to continue to grow but also solidify the foundation to
deliver more consistent results.”

Conference Call

The Company will hold a conference call tomorrow morning, February 28th,
2013, at 9 a.m. Pacific Time (12:00 p.m. Eastern Time), to discuss the
Company’s financial results and business outlook and to answer investor
questions,. After the Company’s prepared remarks, management will host a
live Q&A session, to answer questions submitted via email. Please email
your questions to jmoisio@impacmail.com.
Investors may participate in the conference call by dialing (866)
573-1930, conference ID number 21650817, or access the web cast via our
web site at http://ir.impaccompanies.com.
To participate in the conference call, dial in 15 minutes prior to the
scheduled start time. The conference call will be archived on the
Company's web site at http://ir.impaccompanies.com.

Forward-Looking Statements

This press release contains certain forward looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Forward looking statements, some
of which are based on various assumptions and events that are beyond our
control, may be identified by reference to a future period or periods or
by the use of forward looking terminology, such as “may,” “will,”
“intends,” “believe,” “expect,” “likely,” ”appear,” “should,” “could,”
“seem to,” “anticipate,” “expectations,” “plan,” or similar terms or
variations on those terms or the negative of those terms. The forward
looking statements are based on current management expectations. Actual
results may differ materially as a result of several factors, including,
but not limited to the following: our ability to manage effectively our
mortgage lending operations and facilities and continue to expand the
Company’s growing mortgage lending; volatility in the mortgage industry;
unexpected interest rate fluctuations; decrease in purchase money
transactions; inability to hire qualified retail loan officers or
transact with qualified correspondents; failure to successfully launch
or continue to market new loan products; increased competition in the
mortgage lending industry by larger or more efficient companies; issues
and system risks related to our technology; more than expected increases
in default rates or loss severities and mortgage related losses; ability
to obtain additional financing and the terms of any financing that we do
obtain; increase in loan repurchase requests and ability to adequately
settle repurchase obligations; failure to create brand awareness; the
outcome, including any settlements, of litigation or regulatory actions
pending against us or other legal contingencies and our compliance with
applicable local, state and federal laws and regulations and other
general market and economic conditions

For a discussion of these and other risks and uncertainties that could
cause actual results to differ from those contained in the forward
looking statements, see the annual and quarterly reports we file with
the Securities and Exchange Commission. This document speaks only as of
its date and we do not undertake, and specifically disclaim any
obligation, to release publicly the results of any revisions that may be
made to any forward looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of
such statements

About the Company

Impac Mortgage Holdings, Inc. (IMH or Impac) provides mortgage and real
estate solutions that address the challenges of today’s economic
environment. Impac’s operations include mortgage lending and servicing,
portfolio loss mitigation and real estate services as well as the
management of the securitized long-term mortgage portfolio which
includes the residual interest in securitizations.